Sawmills and Wood Preservation

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 2,600 sawmills and wood preservation companies in the US produce and treat a variety of wood products, including structural elements and dimension lumber. Major revenue categories include softwood lumber, hardwood lumber, preserved wood products, and wood chips. Sawmills may provide wood preservation services as a final step of production. Some large companies are vertically-integrated and own timberland or downstream operations, including divisions involving real estate ownership and residential construction.

Sensitivity To Economy And Construction Activity

Demand for wood products is highly dependent on the health of the construction and household furniture industries, both of which are sensitive to economic conditions.

Variable Timber Costs And Supply

The cost and supply of timber can be volatile, and affect margins and profitability for sawmills and wood preservation services providers.

Industry size & Structure

The average sawmill and wood preservation firm operates out of a single location, employs about 35-36 workers, and generates $18 million annually.

    • The sawmill and wood preservation industry consists of about 2,600 firms that employ 93,400 workers and generate $47.8 billion annually.
    • Sawmills account for 90% of firms and 78% of industry revenue.
    • The sawmill industry is fragmented; the top 50 companies account for 53% of industry revenue. The wood preservation industry is concentrated; the top 50 companies account for 85% of industry revenue.
    • Large companies with sawmill operations include Weyerhauser Company and PotlatchDeltic Corporation. Large companies that provide wood preservation services include Koppers Holdings, and Pacific Wood.
    • Some large companies are vertically-integrated and own timberland or downstream operations, including divisions involving real estate ownership and residential construction.
                                  Industry Forecast
                                  Sawmills and Wood Preservation Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  Mar 27, 2024 - Sawmills’ Prices Drop, Labor Costs Rise
                                  • Producer prices charged by sawmills and wood preservation firms were down moderately in Q4, year-over-year, according to the Bureau of Labor Statistics (BLS). Lower producer prices may be due to lumber prices coming off their pandemic-era highs and weaker housing demand amid elevated interest rates. BLS data show that in Q4, industry employment decreased slightly compared to a year earlier, but wage growth was up moderately over the same period. Weaker pricing combined with high labor costs could pressure sawmill margins.
                                  • New single-family home sales fell 0.3% month-over-month but were up 5.9% year-over-year in February 2024, according to the US Department of Commerce. While a rise in interest rates in February slowed new home sales, the overall market is gaining ground amid tight inventories of existing homes for sale, according to Reuters. Lower home prices may also lure buyers; the median new home sales price in February was $400,500, down 3.5% from January 2024. February’s median home price was also the lowest in two and a half years. To attract buyers, builders are reducing home sizes to make them more affordable while offering discounts and other incentives.
                                  • Home builder confidence improved in March amid a lack of existing homes on the market and moderating mortgage rates that remained below 7%, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), rose three points to 51 in March 2024, which marked the highest HMI reading since July 2023 and the fourth consecutive month of strengthening confidence. Any HMI reading over 50 indicates that more builders see conditions as good than poor. The NAHB said that while lower interest rates have improved affordability and drawn more buyers back to the market, 2024 could bring supply-side headwinds, including shortages of workers, materials, and available lots. Home builders are significant buyers of major household appliances.
                                  • Apartment buildings are getting taller amid sustained demand for rentals, scarcity of land, and some cities’ willingness to change zoning rules to attract development, according to The Wall Street Journal. Between 2021 and 2023, US cities added more than 2,900 buildings with more than 200 units, a 17% increase of the number built between 2018 and 2020, according to property data firm Yardi. High interest rates and single-family home prices continue to prop up demand for rentals, even among those with relatively high incomes. Some cities are easing some zoning rules, such as minimums for parking. The economics of multifamily development have also changed. Higher construction costs mean buildings need to have more units to be profitable.
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